Affiliate marketing is a method where a retailer, merchant or brand can acquire customers by using an “affiliate network” to put ads, banners or information on third-party websites (known as the affiliate). If the concept is foreign or confusing, you’re not alone. This form of marketing is rather unique to the online world and using it correctly can get rather complex.
To put it more simply, here is how affiliate marketing works:
- A website displays banner ads or buttons promoting products or services from other retailers or companies.
- The website then receives a commission if site visitors perform a desired action, ranging from a simple click-through to the retailer’s website to lead generation to making a purchase.
- The retailer pays a fee for the click, which is collected by the affiliate network company.
If you’re a small business with a product to sell, affiliate marketing might seem like a slam dunk. Similarly, if you’re a website or blog owner looking to monetize your site, this might be a lucrative option. Let’s examine the ins and outs of affiliate marketing and determine if it’s right for your small business.
Why Affiliate Marketing?
As opposed to standard online marketing, affiliate marketing gives advertisers more control over how they spend their advertising money. By limiting the payout to only the websites that perform, the advertiser is not “wasting” money on unseen or ineffective impressions. As a model, it’s more aligned with cost-per-conversion advertising than cost-per-click advertising, meaning the affiliate gets paid only when the retailer makes a sale.
For website publishers, affiliate marketing is a way to get advertising on your site without having to employ a sales or creative team to build ads. The network that runs the affiliate ads will be in charge of reporting on analytics and keeping track of your site’s performance. While it may seem that this is an easy way to make some money, the truth is that affiliate sites have their own responsibilities and demands too.
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Pitfalls of Affiliate Marketing, For Advertisers
You Might End Up Competing With Your Own Ads
Most online advertisers use a mix of digital advertising options, including search engine marketing, pay-per-click, relationship marketing and more. Many affiliate networks use the same tactics, so you might end up competing with your own ads. While this might turn into a very interesting A/B test, chances are the cost you’re paying for your other online display ads is high, and you don’t want to waste that money.
You Can’t Fully Control Your Brand’s Exposure
Because you aren’t necessarily vetting every website that will carry your affiliate ads, it’s possible that your products or brand might be presented alongside questionable content. Also, some sites use less-than-reputable tactics, such as email spamming or false advertising and the consumer might come to associate you with these tricks.
For the sake of protecting your brand, make sure to set very strict guidelines, especially around promotions and pricing, and hold your affiliates accountable if those guidelines are broken.
- You Might End Up Paying Commission to an Affiliate That Didn’t Earn It
While the instances are few and far between, there have been cases of affiliate sites and networks defrauding retailers out of money. One such tactic tries to make it appear as if a user visited the affiliate site before making a purchase, when in actuality they didn’t. Another is leading users to your site under false pretenses, such as the promise of a coupon or discount code.
The best way to avoid this is to keep close track of your analytics, especially in the beginning, and evaluate what sites are really working for you. You can also take a look at metrics like referring URLs to really determine if the affiliate has earned its finder’s fee.